Even if Slovakia Approves the EFSF Expansion, Will it be Enough?

By Hao Li: Subscribe to Hao's RSS feed

October 12, 2011 2:56 PM EDT

After Tuesday's scare, Slovakia seems poised to expand the size of the Eurozone bailout fund EFSF.

Opposition party leader Robert Fico said on Wednesday that he strike a deal with Prime Minister Iveta Radicova that should push through the expansion by Friday at the latest.

In doing so, the EFSF's lending power will be expanded from 250 billion euros to 440 billion euros.

Four hundred and forty billion euros, however, may still not be enough. The figure was conceived in July. Since then, however, Greek bond yields have soared.

(Image below courtesy of Bloomberg)

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So how much money does the Eurozone actually need?

Former British Prime Minister Gordon Brown suggested two trillion euros. Nouriel Roubini, chairman of Roubini Global Economics, said "at least" 2 trillion euros "in the next few weeks."

"Investors now believe" the 440 billion euro figure is inadequate and "are calling for the bailout fund to be increased towards 2 trillion euros," wrote BBC economics correspondent Andrew Walker.

However, if the Eurozone wants to expand the power of the EFSF again, it may face stiff resistance.

If the Slovakia episode taught investors anything, it is that getting anything controversial done in the 17-member union can be a slow and complicated process.

E-mail Hao Li at hao.li@IBTimes.com.

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